Whither the Stock Market? Don’t Panic! New Bargains Are Popping Up

For some time now, I have been warning of a steep stock market correction. At times, even I felt like I was a stopped clock with the warnings.

But I knew it was only a matter of time before the massive run-up in the U.S. equity markets from the March 2009 crash low would have to take a breather.

I also knew that a lot of gains would be given back, quickly.

The last couple of weeks have already seen the Dow give up all of its gains for 2014. And more declines are coming.

Before I tell you more, let me be perfectly clear: The decline that is now starting in the main U.S. indices is merely a correction, and nothing more.

The long-term bull market in stocks is still in play, and the Dow will explode higher to over 31,000 once this correction is over.

So don’t panic. Don’t let the Dow’s recent decline or further declines bother you. Don’t go to the sidelines. If you have holdings that have large gains, or positions you cannot exit, for whatever reason, consider hedging. I’ll tell you more about that in a minute.

The Dow will explode higher to over 31,000 once this correction is over.

At the same time, don’t be afraid to scoop up highly rated stocks during declines. There are already new bargains popping up.

That said, let me tell you the chief reasons equities are now declining and how low I think the Dow could go.

First, as I noted previously, a correction was way overdue … Simply based upon technical conditions.

Second, from a fundamental point of view, we are witnessing a severe, but temporary wave of deflation.

You can see it in commodities, where the prices of everything from the grain markets, to gold, to oil are sliding.

You can see it in Europe, where the Continent is literally in a depression.

You can see it in the soaring value of the U.S. dollar, which is good news for us in the sense that our dollars buy us more, but deflationary for corporate profits.

And naturally, you can see it in the U.S. equity markets, which are now reflecting that deflation.

Third, is the initial impact of rising geopolitical discontent around the globe. Long term, it’s a bullish force for the U.S. equity markets. But short term, investors around the world are alarmed. They’re in a “risk-off” mode. And they’re moving to the sidelines, which by default, is positive for the dollar, threatening to make deflation even worse.

All of this, mind you, will reverse in the months ahead. Worsening domestic and international politics will become a bullish force. As the dollar moves even higher, the Fed will get concerned and become more active attempting to once again devalue the greenback. And investors will move back to a “risk-on” position.

Right now, my models tell me that the Dow could slump to as low as 14,500 over the coming months. The S&P 500 Index, as low as 1,700. That means there’s roughly as much as an additional 12 percent or so of downside out there.

It’s not the end of the world. Keep that in mind. It’s not the end of the long-term bull market in stocks. Not by a long shot.

It’s merely a healthy correction, one that will actually serve to re-energize the markets by forcing die-hard bulls to sell, thereby giving the market new buyers once the correction plays itself out.

My suggestion: If you have equity positions you cannot or do not want to exit, for whatever reason, consider hedging those positions via an inverse ETF such as:

The ProShares Short S&P 500 (SH)

The two times leveraged ProShares UltraShort S&P 500 (SDS)

The ProShares Short Russell 2000 (RWM)

For small caps, the Direxion Daily Small Cap Bear 3X Shares (TZA).

For tech stocks, the ProShares UltraShort QQQ (QID).

And for the precious metals, while a bounce is in the works short-term, it may not last long, making it difficult to profit from unless you’re a very active investor. With more downside coming for gold and silver, I repeat my previous suggestions of purchasing inverse ETFs to hedge any precious metals or mining shares you don’t want to, or can’t exit, for whatever reason.

Larry Edelson, one of the world’s foremost experts on gold and precious metals, is the editor of Real Wealth Report and Supercycle Trader.

Larry has called the ups and downs in the gold market time and again. As a result, he is often called upon by the media for his investing views. Larry has been featured on Bloomberg, Reuters and CNBC as well as The New York Times and New York Sun.

{53 comments }

wereWednesday, October 15, 2014 at 9:22 am

” But I knew it was only a matter of time before the massive run-up in the U.S. equity markets from the March 2009 crash low would have to take a breather.

I also knew that a lot of gains would be given back, quickly. ”

Oh my, here we go again. Do we even bother showing Larry his own words so eat can eat crow once again?

jonWednesday, October 15, 2014 at 11:08 am

right as rain….
ahahahhaha

jonWednesday, October 15, 2014 at 11:09 am

says hes called this pullback… been calling it since dow was at 9k prob time to buy if hes saying were going lower. last buys he said was oil companies 2 months ago and they all down 30%

CraigFriday, October 17, 2014 at 3:30 pm

Jon,

You are so correct.. I jave looked at Larry’s predictions for 6 yrs and on a scale of 1)horrible predictor -10 (great predictor) his rating is short of a 2 on all his crystal ball writings If you had followed him Gold would now be over 1900 on the way to 5000 plus and the dollar index would be below 74 on its way to 45.. All you have to do is go back and read his posts

GeosSunday, October 19, 2014 at 10:49 pm

Not true. He’s been negative gold since around 1500-1900. He’s been bullish dollar last few years. Some bad calls recently tho but nobody’s perfect. He’s not the only one calling for big gold rally at some point. Look up Avi Gilbert, Martin Armstrong.

jonWednesday, October 15, 2014 at 11:10 am

one positive today i appreciate him getting straight to the point and no talking about guerillas and war cycles for 8 paragraphs before updating markets

jrj90620 ….there is no bear market in stocks …just because it dropped from the top ? Don’t be silly .

zzzzzWednesday, October 15, 2014 at 11:28 am

nothing about the upcoming US election. Something tells me this down trend can only be stopped if one thing happens – the Repubs trounce the Dems. Only the perception of sanity in charge will turn the markets.

grover5995Wednesday, October 15, 2014 at 6:45 pm

If the Republicans take over Congress, insanity will rule for the next two years until 2016.

FollyWednesday, October 15, 2014 at 5:07 pm

If ebola breaks out in the USA, there will be panic in the markets. My gut feelings is to move your investments to the sideline or go short.

HeidiWednesday, October 15, 2014 at 10:41 pm

Folly …. FEAR ….go hide !!!

JohnWednesday, October 15, 2014 at 11:39 pm

As usual, no mention about gold. I thought he was a gold analyst. ha ha ha ha.

HowardThursday, October 16, 2014 at 6:51 am

It would be nice to share and reciprocate genuine money making moves with some serious investors. Maybe it will happen one day.

JohnThursday, October 16, 2014 at 10:20 am

He is still spouting The Dow will explode higher to over 31,000 once this correction is over (see above), but in other releases still says it will be by 2016. That is more than double what it is now, even if you say till the end of 2016, it is a little over two years away. Anyone want to buy some bridges, lol.

HeidiThursday, October 16, 2014 at 7:25 pm

John…re: DOW – could take longer re: Armstrong

MarkFriday, October 17, 2014 at 8:52 am

How long has Larry been waiting for this correction? a few years now telling subscribers to stay on the sidelines?

If you keep guessing one of these times you’re bound to be right -LOL!

Hi, LarryFriday, October 17, 2014 at 11:42 pm

You can be one of the best at times, but if you do not shape up, martin will fire you.Regards. Henry

Hi, LarryFriday, October 17, 2014 at 11:46 pm

You can be one of the best at times,but if you do not shape up,Martin will fire you..Regards. Henry

RobertSaturday, October 18, 2014 at 9:13 am

Congratulations Larry: You were exactly correct about the Euro. It recently dropped like a rock, from about 1.37 to 1.26 or so. Currency traders could have make a fortune.

mikeSaturday, October 18, 2014 at 9:19 am

A clock is right twice a day!

wereSaturday, October 18, 2014 at 11:31 am

but larry is right only 1.25 times each decade

mikeSaturday, October 18, 2014 at 9:18 am

You can fade Larry and make a lot of money! He has cost me a ton of money in the lat 2 years!

RCSaturday, October 18, 2014 at 9:51 am

Larry,

You recommended VXX in Gold and Silver Trader. Stopped out as usual. As always you got in too early and cost everyone money. You need to adjust what ever indicators you are using. The service stinks. I’m out.

HeidiSunday, October 19, 2014 at 11:54 am

RC ….another one bites the dust !!!

cowboySaturday, October 18, 2014 at 10:29 am

Uh, grover5995..Repubs ARE the majority in Congress. They ARE more efficient than the Demacrooks. Unfortunately, the Constitution must be adhered to and none of then, especially your friends, give that a second thought.

CoozbeeSaturday, October 18, 2014 at 12:30 pm

People forget, this is Oct. This is the month that most companies re-evaluate and so do the traders. There are no buying opportunities yet. Now is the time to sit by and WAIT!!! It will be late Nov., before you will want to do anything. And Larry, you are just another puppet for the market.

Charles bruceSaturday, October 18, 2014 at 12:43 pm

Having read your world views Martin…it sounds like you get all your information from Fox News. As for Larry Edelson, you’d be better off getting a pin and saving your money. Thanks jon for your summation of Larry Edelsons accuracy and Mike ..I’ll keep that one for myself 1 day
. As for precious metals.from someone far wiser and learned than me …there is a shortage of silver in Shanghai as there are less than 2 million ounces left which will be expected to be “delivered ” leaving the exchange empty of silver by December. There is a humongously large bet on the Comex in December Silver and this is thought to be placed by the nation of China who will want delivery.
However there is no silver there either (surprise , surprise) and there will be a default.in Decemeber or even possibly before and thats when the fireworks will start. Unlike Germany being defaulted on, to most intents and purposes by the US on its gold China will not take this lying down and it has been suggested that the Comex will close and then the prices reset. or/& the market in future reflecting the real OTC market as in Shanghai and not based on paper and manipulation of the paper price by the persistent naked short selling in Silver on Globex just before the opening most days. it has been also suggested that both exchanges will be out of gold early in 2015 and the same default will happen there as well, if not sooner. It has been suggested that only after this default will Precious |metal prices reflect their true value as they will have to be based on a real market as in Shanghai and not on paper market in the US

JohnSaturday, October 18, 2014 at 1:43 pm

Following elliot wave a few years back I almost lost my shirt. While I like reading these columns, I agree his predictions are as bad as mine, and I am no expert. I have heard this market crash for years now and of course will crash at some point! Not even sure what to do with gold miners right now but given his prediction that is going lower for the short term I think I will buy!

randySaturday, October 18, 2014 at 3:51 pm

none of these analysts know what they’re talking about including the deified m. armstrong. dow 32,000 by the end of this year??? is he nuts too or just laughing all the way to the bank with the huge subscription money he rakes in?

HeidiSunday, October 19, 2014 at 11:51 am

randy … do you have problems reading or understanding ? Martin Armstrong never wrote ” The Dow to 32,000 by 2014 …o.k. ? Martin Armstrong does not sell subscription either…he is free …do you know anything about him ? No …then shut up .
The sample that the Dow could go to 32,000 was based on capital flow – see Japan in the late ’80’s . By the way – his quote for the DOW is 20,000 to 32,000 by 2016 .
Get your facts straight before given false info.

RCSaturday, October 18, 2014 at 4:53 pm

I’ll tell you what I think they do. They use your money from subscriptions and invest it for themselves and make a fortune. They certainly don’t make money from their investment advice. That’s for sure. If Larry is shorting I would start buying.

Charles bruceSaturday, October 18, 2014 at 5:29 pm

100% agree about TA
. When I first started losing money on futures i made for me what was for me then a sensible observation and statement on a prominent website at the time, 10 years ago that under light volume, the market will move in the direction of the stops. No one ever replied to what i thought at the time was a brilliant insight on markets . (I have learnt since that i am a complete idiot to try and change peoples core beliefs, and for other reasons) but still hold this view. The other reason markets move IMO in the short term in a particular direction is mainly to do with expiry of options and futures.
Technical Analysis has so many indicators and all used in a different way by all the different analysts to prove their prediction was correct no matter what that prediction was in the first place and always in retrospect so they are right on every time
Never then and even more so now as all of the markets are rigged by legal and illegal means does TA work …….if only
It worked maybe when there were no derivatives and people bought and sold actual shares quite possibly.
As for Elliot waves i think I read an article by Bob Prechter a long time ago that the Dow would go to 2000 , the SPX to 200 and the FTSE start with a 1.
What annoys me most about 99% of these so called gurus and elliott wave theorists are certainly up there with the most proven wrong predictions of all time is their utter lack of humility and their never ending arrogance to carry on giving advice to others on the future market movements is their inability to ever apologise on air or in the social media or anywhere else about the fact that they got it completely 100% WRONG……nothing phases them.
Why does Mr Martin Weiss employ one such
Mind you ,he will be right one day and WOW wont everyone know it as he will pick out the relevant e mails to prove his point , of course forgetting to include the other 99% of predictions that didnt work out
Sorry to be so long winded and state the obvious …to maybe some , but I am sozzled now and I am off to bed and my last ;last piece of resentment and disdain for these so called gurus has been drawn up from the very bottom of my gut and i am now clean and washed of them all.hopefully forever ( I actually thought it was all out many years ago)
Thank you for reading…Charles

Good question….I am being an idiot again …and talking to myself probably

SamSaturday, October 18, 2014 at 5:47 pm

ALL THE NEGATIVE RATTLE

I like Larry, I think with any free news one should be cautious, but it is your choice to continue reading or subscribing. If you don’t like it, go do something you enjoy.

1. If you only get the start and not the exit point you have a problem.
2. If you are a subscriber and you do not know the amount the advising technician is willing to lose, you probably have a problem.
3. If you are trading with a news letter and can’t read and understand a chart, you have a problem and should search for a wealth adviser or broker to handle your affairs. The odds of anyone, with out years of experience, making a profit are slim.

I like Larry, don’t know or follow most of the new people.

StuRatSaturday, October 18, 2014 at 6:07 pm

What drives the stock market? Earnings, earnings, earnings.Weiss and Edelson don’t use technical indicators enough. They don’t understand cycles correctly. Look back at the Nasdaq rise and fall before and after 2000 and it was rising on “irrational exuberance” but falling then on lack of earnings. Same 2007-2008. Earning fell dramatically and rose from the pits after 2009 Mar bottom.

There were technical reasons to be short the market a month ago. What were they. MACD turning down, declining buy/sell ratio. Bearish divergences in chart patterns. Where are we now?? On a short term basis market is “oversold”. How so. Buy/sell ratio is extremely low. Almost 10 sells for every one buy A bounce may have started the last couple of days. How far will it go? Not sure? Will it last? Not sure. Follow technical indicators.

Earnings are still up but not like they were when rising from March 2009 lows. Bull market is tired but not quite done with yet. So short term I say market will move up; longer term (next 6-12 months) volatile. After that hard to say. When interest rates eventually go up that may mark the end of the bull but that isn’t happening yet. So hedged buys on fundamentally and technically strong stocks.

Gold? There have been no good technical reasons to be long gold since 2012 from weekly charts. So why bother? No fundamental reasons however convincing trump technical reasons. In fact there were good technical reasons to be short numerous times. If gold breaks below 1200 I see it going to 1100 and 1000. Temporary weak bounce now due to flight to safety but will no doubt reverse soon if stock market resumes bullish mode.

RCSaturday, October 18, 2014 at 6:35 pm

Sam, when you are a subscriber to a trading service you expect to get the entry, stop and exit points. That’s what you are paying for. His information stinks. 99 percent of his trades are stopped out. It’s not about liking him or not. I’m sure he is a nice guy. I invested in his trading service not to make friends but to make MONEY. Yes, I did move on but other people need to know before they waste their money. It’s not right what’s going on here.

HeidiSunday, October 19, 2014 at 11:40 am

RC ….I know THAT service cost a lot $ 3000? $ 4000 per year ? But doesn’t anybody ask for some kind of ” proof ” how they handle the market / trading ? Of course , they could make up any lie . Or at least start out small to see how his signals work /
It always comes back to ” A sucker is born every minute ” and this company knows how to milk them .

SpirosinaSaturday, October 18, 2014 at 8:31 pm

Why doesn’t Lazza talk gold as it’s his speciality

What are his models anyway ? He should change his models supplier as they suck !

geneSaturday, October 18, 2014 at 8:46 pm

Larry Please read and look into world history going back in the BIBLE as recently reported by Jonathan Cahn, He has 1 book that has been on the n.y. times best sellers list for over 1 year and he just completed a second book which is again on the n.y.times best sellers list. We are currently in the period called the Shmetah. I’m sure you will be very interested in this history and you will certainly be able to use it . Everyone needs to pray and ask GOD for guidance. not only regarding finances but other life problems Please respond by e- mail because I would like to know your thoughts. GOD BLESS EVERYONE because current times are becoming very difficult. PRAY PRAY PRAY

wereSunday, October 19, 2014 at 9:46 am

quit spouting drivel

GeosSunday, October 19, 2014 at 11:00 pm

Oh, the Bible yeah there’s a definitive source. A book of fairy tales and superstitions by iron age peasants that didn’t even know the earth went around the sun. That’s about as bad as getting investment advice from Glen Beck.

wereMonday, October 20, 2014 at 2:17 am

actually it IS the definitive source – just not for what bonds will do next week. But it does state the earth goes around the sun – well before anyone else “proved” it.

francesSaturday, October 18, 2014 at 9:30 pm

Larry, I know you said never base your investments on taxes but I’m not so sure. Even though we lost big time in 2013 on ZSL and GLL they passed through large gains that I had to claim. It threw me into a higher tax bracket and cost several thousand more on top of all my losses. This really hurt!

sunnySunday, October 19, 2014 at 11:59 am

Ok

Cobra ManSunday, October 19, 2014 at 8:04 pm

Larry has to eat and has already been paid. Weiss and company are like a bunch sportswriters who get paid to write articles after the fact for you to read. Enjoy the history lessons.

StuRatSunday, October 19, 2014 at 11:34 pm

Pray, pray, pray? Oh dear so pathetic. If there is a God there is not much evidence he/she it answers to “good” people and punishes or ignores the “bad”. Will praying stop you from getting Ebola or getting your legs blow off in Iraq or from preventing the Walton family from keeping billions of dollars while others live on minimum wage? No, no, no. Say goodbye to superstitious mumbo jumbo.

geneThursday, October 23, 2014 at 8:02 pm

StuRat read my responce wed.10/22 @5:24 p m

HeidiMonday, October 20, 2014 at 1:11 pm

StuRat…..oh so true !!!

geneThursday, October 23, 2014 at 8:04 pm

Heidi please read my responce wed, 10/22 @5:24 p m

RodolfoWednesday, October 22, 2014 at 1:23 pm

StuRat, and Heidi …..there’s PLENTY of evidence that prayer works. You two have obviously never studied it objectively beyond 5 minutes of prejudiced thought. The real question is how you can say prayer doesn’t work when you can’t prove or provide any evidence that it NEVER works ;) God isn’t obligated to answer a single prayer from any human ever at any time, and to say He never does is pure arrogance (pride plus ignorance). In fact, for you to claim absolute knowledge on this topic claiming God NEVER answers prayer or exacts judgment is quite silly for it makes you think you are “god” with your claim to omniscience. if you are god, then you still believe in a god– we all choose to worship the God of the Bible, or reject Him to worship some idol we fashion in our own deluded minds.

geneWednesday, October 22, 2014 at 5:24 pm

StuRat and Heidi I would like to know who is your god. Look at America today losing all its blessings because it has turned against GOD. Abortions, gay marriages, if it makes you feel good it is o.k. to do. Did GOD cause women to abort their unborn child, does GOD cause criminals to kill, steal, does GOD cause politicians to lie and manipulate data, does GOD cause the manipulation of the gold and silver mkts., does GOD cause politicians to get the U.S. into every foreign countries problems. What is happening in foreign countries is shortly coming to the U.S. If Americans don’t get on their knees and ask GOD for forgiveness we will become worse than third world countries. GOD has been very GRACIOUS to me, my family and the whole world because if HE is not REAL you would not be here today. Get on your knees and thank GOD for being alive and ask HIM for forgiveness. then start praying and continue to do so. I ask AMERICA to start BLESSING GOD,read the bible, OBSERVE GOD’S LAWS, and vote for people who believe in GOD. This world is like a run away train heading for a final disaster. I am 82 years young and if I didn’t believe in GOD I would have been dead many times in my lifetime. MY family and I have had many miracles in our lives, thank GOD, and I know many other people who had miracles in their lives, and it wasn’t a magician who perform these miracles. I thank GOD every chance I get for everything.SO I ask America to get back to the BIBLE and follow GOD’S LAWS. I pray that the politicians and judges begin to follow the Laws of GOD to bring revival back to this country.GOD BLESS AMERICA AMEN AND AMEN